Algerian energy giant Sonatrach has won an arbitration case against Spain’s Gas Natural, which will allow it to charge the utility more for its natural gas, affecting 25 per cent of Spanish supply.
Gas Natural announced in a 16 August filing to the Spanish regulator, the Comision Nacional del Mercado de Valores (CNMV), that it had lost the case, which had been ongoing since 2007.
Gas Natural will be required to back-pay the difference in price of the gas it has bought from Sonatrach over past three years at a cost, which Spanish analysts have estimated could be as much as $2bn.
The utility will use funds set aside to prepare for an adverse ruling during the arbitration hearings, it said in the filing. It may also increase the price of its gas to cover future costs. Gas Natural estimates that the gas it buys from Sonatrach accounts for as much as a quarter of all Spanish supply. Spain consumed 38.6 billion cubic feet of gas in 2009, according to the UK’s BP.
Sonatrach and Gas Natural had been in negotiations since 2005 over an acceptable price for the gas supplied through the Maghreb-Europe pipeline, which links the Hassi R’Mel production hub in northern Algeria with a receiving station in Cordoba on Spain’s southern Mediterranean coast.
In 2007, they decided to move to arbitration hearings at the Paris-headquartered International Court of Arbitration (ICA), which did not arrive at a verdict until August 2010.
The verdict marks the second time a case between the two has been resolved in a year. In December 2009, the ICA ruled that Sonatrach must buy shares held by Gas Natural and Spanish oil major Repsol in the Gassi Touil oil and gas development in eastern Algeria.
Repsol and Gas Natural won a competitive bid round to work on the $3bn development in November 2004. Sonatrach cancelled the contract to develop the field and an integrated gas liquefaction plant in July 2007.
The ICA told Sonatrach it must pay the two Spanish firms for their stakes in the project, but did not award any costs related to development work completed between 2004 and 2007. The ICA did not award any costs to Sonatrach.
Sonatrach and Gas Natural both declined to comment on either case, or the possibility of future projects between the two.